What is the purpose of preparing a Profit and Loss Appropriation Account by a partnership firm?

To record the distribution of profits and losses among partners

The correct answer is option 4- To record the distribution of profits and losses among partners.

Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm. It shows how the profits are appropriated or distributed among the partners. All adjustments in respect of partner’s salary, partner’s commission, interest on capital, interest on drawings, etc. are made through this account. It starts with the net profit/net loss as per Profit and Loss Account.